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  3. the ytm of a 1 year bond purchased today: 0i1=5.2%

The YTM of a 1 year bond purchased today: 0i1=5.2% The YTM of...

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Accounting

The YTM of a 1 year bond purchased today: 0i1=5.2%
The YTM of a 6 year bond purchased today: 0i6=11.4%
The YTM of a 7 year bond purchased today: 0i7=11.6%
The YTM of a 1 year bond purchased next year: 1i2e =5.4%
The YTM of a 1 year bond purchased 2 years from now: 2i3e =5.7%
The YTM of a 1 year bond purchased 3 years from now: 3i4e =6.0%
The YTM of a 1 year bond purchased 4 years from now: 4i5e =6.3%
The YTM of a 1 year bond purchased 5 years from now: 5i6e =6.6%
The liquidity premium for holding a 3 year bond purchased today is 0l3=2.2%
The liquidity premium for holding a 4 year bond purchased today is 0l4=2.6%
The liquidity premium for holding a 5 year bond purchased today is 0l5=3.4%
The liquidity premium for holding a 6 year bond purchased today is 0l6=3.9%
The liquidity premium for holding a 7 year bond purchased today is 0l7=5.0%
(a) According to the liquidity premium theory of term structure, what is the YTM of a 4 year bond
purchased today?
(b) According to the liquidity premium theory of term structure, what is the expected YTM of a 1 year
bond purchased 6 years from now?

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